With the Olympics just days away, and with precious metals sitting at very attractive prices (following this utterly absurd move lower), this is the perfect time to point out that when “going for gold” one can often be better off taking home silver.

As with many of the greatest, long-term investment opportunities, the reasons for investing in silver are numerous and obvious – and will (like all things) become much more obvious, in hindsight. The simplest place to start is with the patterns in price movement, and the reasons for those patterns.

A Tiny Market:

The gold sector is small, both in historical terms, and especially by our modern standards. The market-cap of every gold miner on the planet doesn't come close to equaling the market cap of the world's largest oil producer. Part of the reason this sector is so small (relatively) is a function of its status as a “precious” substance. You can't have a huge market for a commodity which exists in such relatively limited supply.

The other reason the gold sector is (artificially) small? The price-suppression by the anti-gold cabal of Western bankers. If gold were properly priced today, that is, at a price which maintains historical parallels to other prices, then the gold sector would instantly become several times bigger.

If the gold sector is “small”, then the silver sector is microscopic. Perhaps the best way to illustrate this would be to simply observe there are no “large-cap” silver miners, and only a handful of true “mid-cap” corporations. It is largely because of the disparity in size with precious metals markets that a very predictable, long-term pattern has emerged.

Because the gold market is small, in any significant rally “the trade gets crowded” (as those with more trading experience than myself like to say) very quickly, so whether you are a “value investor” or a short-term trader, it doesn't take long for gold to look “expensive”. This is when these same traders/investors invariably look to the next-best-thing: silver.

As “the ugly duckling”, silver always begins any major precious metals rally from a position of being significantly undervalued versus gold (by any historical standard). Thus, as the gold trade gets “crowded”, that “crowd” starts moving into the silver market. Then, because of the tiny size of this sector, silver immediately starts to outperform gold, since it takes a much smaller amount of investor dollars to power it higher.

This, in turn, brings in all the “momentum players”. Not only can they see the pattern on the current charts like anyone else, but unless they are totally ignorant about this sector, they will know about this repetitive, historical pattern. Thus, while the silver rally depends on the gold rally to drive it, silver will almost always make bigger, stronger moves during these “gold rallies”.

A couple of weeks ago, I severely criticized another writer (by name) in a commentary (“Fiscal Follies: Greece versus the U.S.”): the Telegraph's Ambrose Pritchard-Evans. Given how I singled-out Mr. Pritchard-Evans, and given that I acknowledged the positive contributions he also makes with his writing, this is an opportune time to look at one of his more notable pieces.

On January 31^st, Pritchard-Evans wrote Should Germany Bail-out Club Med or Leave the Euro Altogether? In that commentary, he constructs a very persuasive argument that the European Union is headed for one of two fates: a precedent-setting bail-out of Southern Europe's “PIGS”, or a political “divorce” with affluent Northern Europe going one way, while Southern Europe is left to flounder in its own, fiscal nightmare.

The reasoning of the author is solid. Given current parameters, the EU's disparate economies cannot remain united without “rescuing” those members who cannot cope with the fiscal constraints of the EU – due to their reckless/incompetent fiscal policies, which have resulted in massive debts. Conversely, an economic (and political?) “divorce” would solve the problems of the current economic schism – by having EU members willingly group themselves into the “strong” and the “weak”.

The nations of Northern Europe would go to economic “heaven”: an economic grouping with a strong currency, high standard of living, low inflation and (most importantly) solvent economies. Meanwhile, the near-bankrupt southern members of the EU would be left to descend into their own fiscal Hell: the only currency which could rival the weakness of the dollar, a low (and crumbling) standard of living, high inflation (leading inevitably to hyperinflation), and economies still heading toward certain bankruptcy.

It is here where Pritchard-Evans' logic breaks down, in my opinion. He argues that this option would be equally appealing to the South as it would with the North. He is correct that over the very short term that this “helps” those southern nations by allowing them to continue their reckless expansion of their debts – in order to continue totally unsustainable social spending. But it is only a respite of (at best) two or three years, before those debts would spiral so far out of control that hyperinflation or total, debt implosion becomes the only possible options (as it is now with the U.S.).

Here, once again, I would argue that Pritchard-Evans' cultural bias is showing. While the incentives for Northern Europe to “go it alone” are unequivocal, I think that he gives too little credit to the peoples of those southern nations – and even (what passes for) their “leadership”. The future consequences of economic “divorce” would be obvious to the governments of the “PIGS” (Portugal, Italy, Greece, Spain), and I submit that even these weak-willed opportunists would be extremely reluctant to willingly seal their own fates in this manner.

All that would be required for these governments to reject the path to fiscal Hell would be to offer them some sort of economically – and politically – viable alternative to the current EU economic-straitjacket, or fiscal suicide. I believe that such an alternative can be created; more importantly I would argue that such an alternative must be created.

In discussing the “gold reserves” of the U.S. government, the first point to make is that the only way in which this topic can be discussed is from a retrospective viewpoint. The reason for this is that while the U.S. government claims to have the largest reserves of gold in the world (supposedly over 8,000 tons) it has not allowed anyone to see this 'gold' in over 50 years.

Would anyone believe the balance-sheet claims of a Wall Street bank, if it had not been audited in over 50 years? If not, how could we put any credence in the gold reserve numbers of a government which is totally subservient to its Wall Street puppet-masters?

The next, most-important point to make is that the U.S. government defaulted on its gold obligations in 1971, roughly a decade after the last time any U.S. gold was actually seen. At this point, I think it would be helpful to view Wikipedia's definition of “default”:

       failure to satisfy the terms of a loan obligation or to pay back a loan.

The U.S. owed the world ten's of thousands of tons of gold – obligations it racked-up during the Vietnam Decade, and it failed to satisfy those obligations.

Here's a question to test readers. How often does the party defaulting on a loan end up with more money than its creditors? Answer: never. Thus, an obvious observation (yet one which is never made) is that the claims of the U.S. government to still have any gold at all after its gold-default are absurd on their surface – and the only way to rebut that absurdity would be to prove that it still held the gold, by showing it to someone.

While many accounts have been written about the extremely 'shady' dealings which Goldman Sachs has/had with AIG – which led directly to AIG's $180 billion bail-out – unless I've missed it, one of the key issues has been soft-pedaled and another has been ignored altogether. These two topics which I intend to discuss are a) that Goldman Sachs used AIG as its financial 'toilet'; and b) that Goldman Sachs had begun openly and deliberately misrepresenting assets/investments to investors starting in 2006 or 2007 – at a time when all the other banker-oligarchs were continuing to assert their “mark to model” valuations both publicly and privately.

I'm basing my analysis on two, other accounts of the Goldman/AIG relationship: one by New York Times' columnist by Gretchen Morgenson, and one a more recent piece by “an attorney and former monoline executive”.

The first issue has been alluded to by others, but never in blunt terms. Essentially, as the bankster-created U.S. housing-bubble progressed, Goldman Sachs discovered that AIG was so eager and aggressive to “cash in” on what it perceived to be a bankster gold-mine that it would write-up insurance on anything – irrespective of whether its own personnel had any genuine understanding of what they were writing up.

Thus, Goldman Sachs began to take the worst of its financial-feces to AIG, in order to get AIG to write-up “credit default swaps” on the “assets” in question. For those still not familiar with some of the bankster jargon, a credit-default swap is a form of “insurance” used specifically to insure against the risk of default on debt instruments.

As a brief aside, it has been suggested by myself and others that much of the CDS “industry” was simply a sham: writing up phony “insurance” for these assets which was never intended to be relied upon. These phony insurance contracts would then allow the banksters to pretend they had reduced their “risk” - which would, in turn allow them to leverage their mountains of paper to even more obscene levels. That issue is not relevant to the Goldman/AIG relationship, since it is clear that at least one of the parties (Goldman Sachs) took these CDS contracts very seriously.

Indeed, as Goldman found the greedy-but-gullible “bankers” at AIG would insure anything they brought to them, some time in 2006 or 2007 their intent on entering into these agreements changed. Originally, like the other banksters, they entered into these CDS contracts purely for “risk management”. However, as Goldman Sachs began to aggressively short the various “assets” of the U.S. housing bubble, instead of having AIG write-up CDS contracts as protection, Goldman had its housing shorts duping AIG to enter into these CDS contracts – for the specific purpose of making huge, windfall profits when those CDS contracts “blew up”.